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Wednesday morning s
confirmation by Royal
Dutch Shell that it had
agreed to acquire the British Gas
(also known as BG) group for £47
billion (US$70 billion or TT$462
billion) is a potential game-changer
for the local energy sector.
If the transaction is consummat-
ed, it would mean that Shell would
be buying all of the British Gas assets
in T&T, including its natural gas
fields off Trinidad s north and east
coasts, the pipeline infrastructure
that brings the gas from offshore to
Point Fortin and its stake in Atlantic
LNG.
As it stands now, both Shell and
British Gas are shareholders in
Atlantic LNG, the Point Fortin-based
complex that liquefies and exports
natural gas to markets around the
world.
British Gas has a 26 per cent stake
in Train 1, a 32.5 per cent stake in
Trains 2 and 3 and a 28.89 per cent
stake in Train 4.
If the information on the Atlantic
website is correct, and if the trans-
action goes ahead to completion,
my calculation is that Shell will have
a majority stake in Trains II, III and
IV and would be the largest share-
holder in Train I. (See box at right)
If the transaction is consummat-
ed, therefore, one impact would be
that Shell, in effect, would leapfrog
BP s position as being the largest
single contributor to the T&T econ-
omy.
That dominance of T&T s LNG
industry---which is the largest single
contributor of revenue to the Gov-
ernment and people of this coun-
try---is likely to transform the energy
sector in this country as it will mean
that Shell will assume the British
Gas gas supply contract, the nego-
tiations on which are due to begin
shortly, I am told.
It seems to me that negotiating
with Shell/British Gas would
become an entirely different matter
than just negotiating with British
Gas. This is because Shell/British
Gas would be the dominant and
pre-eminent player in T&T s LNG
sector, whereas the British Gas
always played second string to BP.
Their dominance is borne out if
one does the calculations based on
the production numbers on the
Atlantic website (and reflected in
the table).
The calculations lead to the con-
clusion that Shell/British Gas, would
"own" 52.97 per cent of the output
of Atlantic LNG or 7.84 million
tonnes of LNG a year out of total
rated production from the four trains
of 14.8 million tonnes a year.
Would the Government of T&T
be comfortable with any company
enjoying a majority position in T&T s
largest single revenue generator, with
all the implications that that position
would have for the ability of that
company to negotiate favourable fis-
cal and other terms with this coun-
try?
Or does the Government prefer
to retain something close to the sta-
tus quo, where Atlantic has three
large shareholders, none of which
have a casting vote, as it were?
Also, while it may be very early
days to raise this as an issue, would
Shell insist that its majority share-
holding in Trains II, III and IV entitle
it to the majority of seats on the
Atlantic LNG board?
While there is a sense in which
BP and British Gas have alternated
CEOs at Atlantic LNG, will Shell s
absolute majority in terms of output
across the four Trains lead it to insist
that the next CEO (following Nigel
Darlow) and future CEOs should
always be a Shell executive?
Do the shareholders agreements
that established and guide Trains I,
II, III and IV even envisage one enti-
ty having a majority stake?
The question that needs to be
asked (and eventually answered) is
whether, having acquired British
Gas, Shell intends to be a long-term
player in T&T s LNG industry.
The press release announcing the
transaction states: "The combined
group is expected to make substan-
tial disposals of non-core operations
following completion of the com-
bination.
Subject to achieving what the
Shell board considers to be reason-
able value for such operations, Shell
expects these disposals to reach
US$30 billion during 2016 to 2018."
The question therefore becomes
this: Will Shell s majority stake in
Atlantic LNG become part of the
US$30 billion in the disposals that
the company plans to complete
between 2016 and 2018?
If Shell has already decided that
it wants to sell its majority stake in
Atlantic LNG, will any company
that is not Chinese be prepared to
make a bid?
Or does the company see yester-
day s announcement of the purchase
of British Gas as building on its
acquisitions of Repsol assets, which
included the Spanish company s
stake in Atlantic LNG?
An indication that T&T may
(emphasis on may) not be a focus
of Shell s long-term plans comes
from the fact that yesterday s official
news release from the boards of the
companies announcing the trans-
action mentions Australia 30 times
and Brazil 21 times. T&T gets two
mentions.
It is very interesting that one of
the two mentions of T&T in the
press release is: "The combination
is also conditional on the receipt of
various other antitrust and foreign
investment approvals, other regu-
latory consents and waivers or non-
exercise of any termination rights,
pre-emption rights, rights of first
refusal or similar rights in a number
of jurisdictions, including (where
required) Brazil, Trinidad and Toba-
go, the US, Tanzania, Kazakhstan,
Norway and the UK. The relevant
Conditions are contained in para-
graphs (g), (h), (i) and (j) of Part A
of Appendix 2."
But Appendix 2 makes plain that
the acquisition will not go ahead if
the following approvals are not sat-
isfied or, where relevant waived:
European Commission clearance;
Brazilian CADE clearance; Chinese
clearance; Australian foreign invest-
ment clearance; Australian anti-
trust clearance; US Hart-Scott-
Rodino clearance and UK Secretary
of State confirmation. In other
words, there is no specific mention
in the press release that this acqui-
sition requires approval from T&T.
What does that mean and is it,
or is it not, a requirement of the
closing of the transaction that the
T&T Government is required to
approve?
If T&T had an operational com-
petition commission would the
transaction pass the taste test?
And finally, is it in the country s
national interest to facilitate this
transaction, which is likely to have
a profound impact on T&T s future?
APRIL 2015 • WEEK TWO www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
BG VIEW
ANTHONY WILSON
Chief editor-business: ANTHONY WILSON
Associate Editor:
SANDRA CHOUTHI
Editing and design: NATASHA SAIDWAN
Digital Imaging:
CHENIER BELGRAVE
Telephone:
623-8870, 623-7543,
623-News, 625-7380/3
Fax: (868) 623-2050 (Editorial)
Fax: (868) 623-2050 (Advertising)
OFFICES:
22-24 St Vincent Street,
Port-of-Spain,
PO Box 122.
E-mail address:
businesstoday@guardian.co.tt
Internet address:
http://www.guardian.co.tt
What does Shell's transaction mean for T&T?
Train
BP
BG
Shell Shell/BG Output
Shell/BG
(tonnes per annum) combined output
Train 1 34% 26%
20%
46%
3 mill
1.38 mill
Train II 42.5% 32.5% 25%
57.5%
3.3 mill
1.9 mill
Train III 42.5% 32.5% 25%
57.5%
3.3 mill
1.9 mill
Train IV 37.78% 28.89% 22.22% 51.11%
5.2 mill
2.66 mill
Source: Atlantic website. Author's calculations
Energy Minister
Ramnarine says:
Speaking from the Miami
Airport on his way to Jamaica
for the visit of US President
Barack Obama, Minister of
Energy Kevin Ramnarine said
that Shell and British Gas
representatives in T&T had
briefed him on the transaction
yesterday morning.
I have spoken to Shell's
country chairman Luis Prado on
the deal with BG. The Royal
Dutch Shell group CEO has also
written to the Hon Prime
Minister.
This is a significant
acquisition in the global oil and
gas business. It creates the
largest company by market
capitalization in the FTSE 100.
T&T is one of BG Group's top
performing assets, along with
Brazil, Australia and
Kazakhstan. T&T represents 13
per cent of BG's global
volumes. They have a
production of around one billion
cubic feet of natural gas per
day and a significant position in
all four LNG trains in Point
Fortin.
I am advised that Shell
considered Trinidad as a very
valuable part of the BG asset
base and that is based on two
things, LNG and Deepwater.
Trinidad and Tobago was very
central to this.
I think Shell brings
advantages to T&T. Shell is one
of the largest companies in the
world and has always been at
the cutting edge of technology.
Their access to capital and
technology will be an
advantage for our country.
"
"